Time to get out and cash in?

75% of business owners regret selling their business within a year of exit. Digest that before you go any further with any idea of selling-up. Then, if getting out and cashing in is still in your thinking, read on to get former print chief turned business consultant Stuart Mason’s take on prepping your company for sale. The rest is in his own words…

The simple fact is the majority of business owners do not plan personally for their exit and then find themselves in a position where the novelty of time off and holidays has worn off, or perhaps they never planned for their financial future outside the business. Moreover, regret often comes from the realisation that the lack of preparation meant that the real value of the business was not realised.

How much is a business worth that’s valued at £1.5m? £1.5m? Less if there are not multiple interested parties? Less when the due diligence process starts? Less because the business isn’t quite as slick as you thought? How much more could it have been worth if you’d spent time planning for growth and concentrated on the desirability of your business? How much more if you had created the vision to expand the business profitably? And how much more if you had taken the time to create, show, and share the company’s potential. Is that not what a would-be buyer would be looking for?

You see, too many business owners get fixated on the accounts rather than what really counts, and what really counts is desirability. Of course, the financials are important. They are, however, just one piece of the jigsaw. Take your time to complete the picture for the eyes of a potential buyer, and you could be looking at a significantly higher price, to say nothing of a considerably easier due diligence process. That’s the right time to sell your business.
If you’re at that point, Junction Twenty can help you plan your most profitable exit, via 20 modules that challenge and change your business. I’ll share a few thoughts with you.

The growth curve - everything around desirability starts here, by using historical data and future forecasts to plan the next five or ten years of growth.
A recent client with a three-year exit plan had no desire nor intention to grow their business from £2.5m to £10m. The business, however, did have that potential, so their growth curve charted that journey. Based on ambitious, realistic, and quantifiable figures, the that provided a roadmap for the new buyer. Two years into that plan, the company had achieved the projected growth, indicating that the figures were accurate and the ‘bigger goal’ was achievable. The outgoing party was open and honest about saying they did not have the appetite or skill to grow the business to that point - they did, however, show the power of possible in that growth curve documentation.

So how do you accurately forecast that ambitious growth? For this, we’ll look at our three friends TAM, SAM, and SOM, essential market sizing concepts that can help you understand your business’s potential as you prepare it for sale.

TAM (Total Addressable Market) represents the entire market demand for a specific product or service. It’s the grand total of potential customers who could benefit from your offering, assuming there are no geographical or other restrictions. For instance, if you’re selling a niche software product for small businesses worldwide, your TAM would encompass all small businesses globally, regardless of their industry.

SAM (Serviceable Addressable Market) is a subset of TAM and represents the portion of the market you can realistically target with your resources and strategy. Using the same example, your SAM might be small businesses within specific industries or regions that align with your marketing budget and expertise. For example, businesses with less than 50 employees in the UK. SAM provides a more focused view of your market potential.
SOM (Serviceable Obtainable Market) is an even smaller segment of SAM, reflecting the share of the market you can reasonably capture with your current resources and market approach. Continuing with the software product example, your SOM could be the number of print and graphics businesses with less than 25 employees in the UK. These are your chosen industries and regions that you can realistically reach and convert into customers.
In preparing your business for sale, these concepts can be invaluable. Prospective buyers will scrutinise your market potential. By providing a clear understanding of your TAM, SAM, and SOM, you demonstrate the growth opportunities and market reach. You may identify missed opportunities in your SOM and highlight significant development opportunities expanding your TAM.

This can help you negotiate a better price and secure a successful sale because, crucially, you can demonstrate why there’s a good reason to buy